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CBS, Time Warner Cable reach agreement, end blackout

Microsoft announces it's buying Nokia's mobile phone business, Vodafone sells its shares of Verizon Wireless back to Verizon Communications and CBS reaches a deal to end the blackout on Time Warner Cable.
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Roger Yu, USA TODAY
1:23 p.m. EDT September 3, 2013

The CBS headquarters seen Aug. 2 in New York City.(Photo: Andrew Burton, Getty Images)

CBS Corp. confirmed Monday that it has reached a new broadcasting rights agreement with Time Warner Cable, ending a month-long blackout of the network's shows at several key markets in the country.

CBS' programming resumed at 6:00 p.m., ET Monday in the affected markets. The companies didn't disclose specific terms of their new retransmission contract, which spells out the amount of money that TWC pays CBS for the rights to carry the CBS-owned TV stations.

"The final agreements with Time Warner Cable deliver to us all the value and terms that we sought in these discussions," wrote CBS' CEO Leslie Moonves in an e-mail sent the company's employees. "This has been a difficult time for our viewers and for CBS. I am glad it's behind us. It's good to be back."

Their new agreement also includes broadcasting rights of the cable networks owned by CBS Corp., including Showtime Networks, CBS Sports Network and Smithsonian Channel.

Their retransmission contract expired at the end of June. But CBS' stations were kept on TWC's lineup as they kept delaying deadlines for a new deal.

This image provided by CBS shows a CBS advertisement in Times Square in New York on Aug. 2. Three million Time Warner Cable customers in New York, Los Angeles and Dallas had lost access to CBS programming in a fee dispute.(Photo: CBS via AP)

On Aug. 2, TWC, the nation's second largest cable TV provider, finally dropped the stations after they were unable to reach an agreement by their self-imposed 5 p.m. deadline. As a result, more than 3 million TWC customers in eight markets, including New York City, Los Angeles and Dallas, have been unable to watch the nation's No. 1 prime-time network since the blackout.

CBS has said it deserves to be paid more for its programming given its shows' popularity and wants to control digital rights. TWC has maintained that the network's shows are available for free over the air and offered to carry CBS stations to its subscribers on an a la carte basis if they couldn't reach an agreement.

While the blackout lasted longer than anticipated, analysts predicted that the urgency to strike a deal would grow as the NFL - whose games draw top ratings - launches its regular season on Sept. 5. Both sides stand to lose if they couldn't reap the lucrative advertising revenues that NFL games generate and face the ire of football fans who were starting to campaign more aggressively for the end of the blackout.

Meanwhile, more consumer groups and lawmakers in Washington, D.C. - including U.S. Sens. Barbara Boxer and Dianne Feinstein, both California Democrats; Mignon Clyburn, acting chairwoman of the Federal Communications Commission; and The National Consumers League - called for a quick resolution.

Time Warner in Syracuse, N.Y.(Photo: Handout)

"We're pleased to be able to restore CBS programming for our customers, and appreciate their patience and loyalty throughout the dispute," said Time Warner Cable CEO Glenn Britt, in a statement. "While we certainly didn't get everything we wanted, ultimately we ended up in a much better place than when we started."

Their contract only involves TV stations owned by CBS Corp. CBS-affiliate stations owned by other broadcasting companies — even if they're in TWC service areas — were not affected by the negotiations or the blackout.

There have been other blackouts over retransmission fights in recent years, but the CBS-TWC dispute was the most stark example of the growing tension over how much pay-TV providers should pay to carry over-the-air broadcast stations.

Retransmission fees - which can range from a few cents per month per pay-TV subscriber for small stations to nearly a $1 for larger network affiliate stations - have been growing rapidly. The industry total is expected to more than double from $2.36 billion in 2012 to $6.05 billion — about 23% of total TV station revenue — by 2018, according to industry research firm SNL Kagan.

CBS, whose lineup includes some of the most popular shows, including NCIS, Under the Dome, The Big Bang Theory and 60 Minutes, has been openly ambitious about growing its retransmission revenue. In its negotiations with TWC, CBS sought $2 or more per subscriber while TWC was bidding $1 or less, according to analysts' estimates.

CBS generated about $250 million in retransmission revenue last year and expects to top $1 billion by 2017.

As they dug in their heels during the blackout, CBS and TWC also waged a highly charged public relations war, with press statements aimed at influencing TV viewers and lawmakers.

On Aug. 5, TWC released a letter written by Britt to Moonves, proposing to accept the financial terms TWC "reluctantly agreed to" earlier so long as other terms of the old contract were kept.

But the negotiations turned on another thorny issue - who controls the streaming rights for live and archived shows. CBS said it wanted to retain the flexibility to issue streaming rights to established online companies like Netflix and other emerging players.

"We are receiving fair compensation for CBS content and we also have the ability to monetize our content going forward on all the new, developing platforms that are right now transforming the way people watch television," Moonves wrote Monday.

In his statement, Britt called for changes to the 1992 retransmission consent rules. "We sincerely hope that policymakers heed that call and take action to prevent these unfortunate blackouts soon," he said.

In a statement, FCC's Clyburn said she was "pleased" by the agreement. 'Media companies should accept shared responsibility for putting their audience's interests above other interests and do all they can to avoid these kinds of disputes in the future," she said.